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Jane Hali

Deborah Weinswig

11/25/2013

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Speakers

Jane Hali, VP of Custom Research, WGSN Group has 30 years of diverse experience in retail, wholesale and consulting to the investment community. She has built a reputation on her ability to translate fashion trends with the more commercial elements of retail to provide insights, including the trends and catalysts in the industry, for institutional investors. Jane most recently was VP of Consulting at the Doneger Group and prior to that at The Coleman Research Group as VP, Director of Retail & Merchandise Consulting. Jane’s industry experience was cemented through various leadership merchandising roles across multiple brands such as Macy’s, Anne Klein and Jones’s Apparel Group. Jane has been recognized and quoted by many publications including WWD,WSJ, Forbes, Business Week, Bloomberg News. She has also appeared on CNBC, CNN and Bloomberg.

Deborah Weinswig is currently Chief Customer Officer at Profitect. Deborah was the Global Consumer Discretionary Sector Head for Citi Research and lead the Retailing/Broadlines and Food & Drug Chains teams. Deborah recently received ICSC’s Researcher Award for Outstanding Service and was recognized as one of the 36 Best Analysts on all of Wall Street by Business Insider. For eight of the last ten years, Deborah has received the First Place ranking for Retailing/Department Stores and Broadlines. She has also been awarded either Third place or Runner up in Retailing/Food & Drug. Prior to joining Citi, Deborah covered the supermarkets, drugstores, discounters, clubs, and food distributors at Bear Stearns, and was a member of the Global Strategy Team at Morgan Stanley.

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What Makes This Holiday Different?

Shorter Holiday Season

Thanksgiving Day shopping

Black Friday deals announced early

Cyber Monday

– E-commerce

– Increased delivery options

– M-commerce

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10 Things to Watch this Holiday Season

1. Weather – mild and dry

2. Macro economy – things improving at a slower pace.

3. Technology as a hot seller – tablet/smartphone/computer/Xbox one/PS4

4. Other hot sellers -

5. 26 days this holiday season – 6 fewer than last year

6. Thanksgivukkah – Early Chanukah is shifting sales

7. Effects of Sandy

8. Omnichannel

9. 2 screens going to one screen-- TV upgrade cycle?

10. Earlier start to the season may reduce the frenzy

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Holiday Forecast Boris Planer- Chief Economist, Planet Retail WGSN Group

Despite continuing heavy bond-purchases by the Federal Reserve Bank in the year 2013, the economy of the United States has been recovering below expectations. As the labour market remains under pressure and payroll taxes have been increased, households have begun to save larger parts of their incomes leading to an only sluggish development of aggregate demand.

The latest shutdown of the government in October and the fact, that this incidence might recur in February 2014 and develop into a permanent threat for both politics and the economy, has further weakened consumer confidence.

Therefore, Holiday shoppers this year might be very budget-conscious, potentially making the holiday shopping season a more promotional one than it was in previous years. For instance, Walmart, Target and Toys R US, among others, have already begun courting customers with special offers and services, partly one month earlier than in 2012.

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Holiday Sales Forecast

For 2013, The National Retail Federation expects sales in the months of November and December to increase 3.9% to $602 billion. – WGSN group projects a flat year at 3.5% for the 2 months

combined. – WGSN group expects the 2013 holiday season to be highly

competitive, with promotions – both scheduled and unscheduled – likely to characterize the shopping environment.

– In the US, retail spending in November and December can account for as much as 40% of a retailer’s annual sales and 20% of total industry sales.

2012 – Actual holiday season sales growth was 3.5% and beats the 10-

year average increase of 3.3%. – 24% of Department store revenue came during holiday season – Jewelry had the highest % of sales – 29%

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Shorter Holiday Season

Last year, consumers had 32 days to shop between Thanksgiving and Christmas, including five weekends. This year, they have six days and one weekend less to check off everyone on their shopping list.

A shorter holiday shopping season may actually prove to be beneficial to retailers by creating a greater sense of urgency among consumers to shop earlier in the season

There was a definite lull and shopper fatigue in the month of December, 2012

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Shorter Holiday Shopping Season

6 fewer days between Thanksgiving and Christmas

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Holiday Same Store Sales

Year Holiday Sales Change

2012 3.50%

2011 5.08%

2010 5.30%

2009 0.50%

2008 -4.41%

2007 2.75%

2006 3.33%

2005 6.20%

2004 6.77%

2003 5.11%

2002 2.12%

2001 2.07%

2000 3.40%

NRF Holiday Survival Guide 2013

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NRF Holiday Survival Guide 2013

11 Copyright © 2013 Weather Trends International

• The Thanksgiving weekend is the coldest in over 25+ years. This will drive strong sales for both gifts and cold winter merchandise.

• This will like cannibalizes some December seasonal merchandise sales.

• Previous two warm Black Fridays (2011, 2012) led to a 1-day surge and then very weak weekend traffic as consumers enjoyed warm outdoor weather as opposed to shopping.

Coldest Thanksgiving Weekend in 25+ years!

Black Friday – COLDEST IN 25+ YEARS

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Copyright © 2013 Weather Trends International

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87% AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR

2013

Dates are weekending Saturday

2014

BARS = year-over-year temperature forecast

DOTTED LINE = Actual Verification

TODAY 2012

Q3: A choppy Fall but driest in 8 years

(Favorable Store Traffic) Q1 coldest in 20

years, snowiest in 19 years

Q2 coolest in 4 years…wettest in

25+ years!

Winter Coldest & Snowiest in 3 Years!

NOV: Strong Sales DEC: Store Traffic RISK! JAN: HIGH RISK FEB: VERY HIGH RISK

National Year-Ahead Temperature Trends/Accuracy

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Q4 National Temperature Trends

The Nov – Jan retail calendar Q4 will trend the coldest in three years (5th coldest in 25+ years) and much below average for the U.S. overall.

Great for must have winter seasonal merchandise sales (up 20% to 200% over last year) but a negative for overall store traffic (-1% to -2%).

Mall based stores and on-line sales fare better in a cold/snowy Winter while open air centers, stand alone retailers and home centers are particularly hard hit.

15 Copyright © 2013 Weather Trends International

The critical 4-weeks before Christmas are likely to have snow storm impacts with national snowfall forecast up 113% over last year and much above average (5th snowiest in 25+ years).

The balance of winter is likely to bring a brutally cold and snowy January and February with frequent Nor’easters creating significant disruptions to store traffic and overall retail sales. Overall Retail Industry SSS will be negatively impacted by 1-2% after a strong November, choppy December and high-risk January and February.

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Thanksgiving Day shopping

Thanksgiving Day is a real shopping day this year with more retailers opening as early as 6pm

Stores open on Thanksgiving to counter shorter calendar and slow growth

One of the fastest growing shopping days. – Accenture Survey results indicate that Thanksgiving Day has

emerged as an established season event, with 38% of shoppers likely to shop on the holiday. Of those shoppers, 41% indicated that they will be out shopping between 6 p.m. Thanksgiving Day and 5 a.m. on Black Friday.

Fastest growing shopping day with more than $633 million spent in 2012 – Retailers are trying to get customers in the physical store instead

of shopping online from home

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Black Friday Deals Announced Early

On 1 November, Walmart.com shoppers were able to access rollbacks on brand-name electronics and home goods, typically reserved for Black Friday and Cyber Monday. In addition, the site is also offering more than 300 early-bird specials at exclusive online-only prices.

51.1% of retailers plan to start Thanksgiving weekend online promotions at least 5 days early

Home goods are the number one pick for Black Friday deals this year – Comprise 35% of home and garden deals in 2012 – More than double the number of Editors' Choice deals on large

appliances – Vacuums will be heavily discounted, especially refurbs – Small appliances and tool deals for under $10 – It will be the best time to buy tools but many will require in-store

pickup

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Cyber Monday

Predicted to be the biggest shopping day by sales

According to Adobe, Cyber Monday sales beat Black Friday sales in 2012 because of social media and Pinterest

– 77% of sales were generated from social media referrals

13.1% sales growth 2013 vs 21% in 2012

Customers shifting from physical stores to online shopping

The most-frequented searched retailers on Cyber Monday include Walmart, Best Buy, Amazon, Sears and Target, according to CNN Money.

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Ecommerce

Online sales predicted to increase 13-15% – Expected to spend 20% more than other holiday shoppers – US web shoppers will spend as much as $82 Billion online this holiday season

Amazon leading the pack – Partnership with USPS for Sunday delivery in select markets. This gives them an

even greater competitive edge over others, and other retailers need to ensure that shipping rates are low or free and that delivery times are minimal

Increased deliver options – While free shipping has become an accepted cost of doing business online, more

operators are introducing a variety of shipping options, such as same-day or next-day delivery, and click & collect.

Click & Collect – Online and Mobile Shoppers Can Now “Reserve in Store” at More Than 600 U.S.

Gap and Banana Republic Locations

Types of online offers, according to NRF – Email campaigns (44.2%) – One-day sales (41.9%) – Gift with purchase (23.3%) – Free shipping (20.96%) – Discounted shipping (20.9%)

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Mobile

Defined as “wildcard” – Leading area of e-commerce growth

– Accounted for 18% of ecommerce in 2012

Some predictions have mobile sales up as much at 60% account for 16% of online sales – Tablets will account for 62.5% of m-commerce

– desktop converts at a rate of 2.5 percent, tablet converts at 2 percent, and phone is really small at just 0.8 percent

More Price Matching to combat showrooming – Look for more retailers to roll out price matching offers this

season in attempt to better embrace consumers using their smartphones to locate local deals

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Other Opportunities and Challenges

Layaway – Continuing to increase in popularity

– Drive incremental traffic to stores

Managing risk with returns

On-shelf availability & Inventory Distortion – 7 in 10 retailers expect to carry higher inventory levels this year

– 18% are increasing access to inventory via drop-shipping

– Build up of excess inventory may lead to order cancelation

Consumer confidence still low – More than half of female shoppers are focusing on what they need vs

what they want

Lack of must have gifts may increase purchase of gift cards

Food stamps to be cut by $5 billion (5% decrease per household)

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What People Will Be Buying

Top Toy Trends

Boys Girls

LEGO Barbie

Video Games Dolls

Cars & Trucks Monster High Dolls

Hot Wheels Disney Princesses (T)

Xbox One Tablet/Apple iPad (T)

PlayStation 4 American Girl (T)

Skylander Lalaloopsy (T)

Remote Controlled Vehicles

Furby

Action Figures LEGO/LEGO Friends

Bicycles (T) Elmo/Big Hugs Elmo

Teenage Mutant Ninja Turtles (T)

Hello Kitty

Popular product categories – Computers and electronics

– Smartphones

– TVs

– Tablets and eReaders

– Fashion

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KEY FASHION ITEMS FOR THE HOLIDAY SEASON

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Jenny Packham Rachel Zoe

THE SPARKLE SWEATER

3.1 Phillip Lim

JUNIORS CONTEMPORARY MISSY

HOLIDAY 2013

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THE DRESS

Cameo Dress Tibi

JUNIORS CONTEMPORARY MISSY

HOLIDAY 2013

Ports 1961

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Reed Krakoff Elie Tahari

LEATHER ACCENTS

Dakota Collective

JUNIORS CONTEMPORARY MISSY

HOLIDAY 2013

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Charlotte Ronson

LACE

DKNY

JUNIORS CONTEMPORARY MISSY

HOLIDAY 2013

Ellie Saab

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Lela Rose

NOVELTY- BAROQUE

Raoul

JUNIORS CONTEMPORARY MISSY

Joes Jeans

HOLIDAY 2013

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Seven For all Mankind

NOVELTY- COATED, LUXE SATEEN

Versacel

JUNIORS CONTEMPORARY MISSY

Lerock

HOLIDAY 2013

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Celine

Elie Saab

HANDBAGS

COACH

Philip Lim

HOLIDAY 2013

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Kate Spade

JEWELRY- BOLD STATEMENTS

Michael Kors

Anthropologie Luv AJ Anthropologie

HOLIDAY 2013

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Lanvin Ivanka Trump

J. Crew J. Crew

FOOTWEAR

Vince Camuto

Sacai

HOLIDAY 2013

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Summary

Holiday sales increase 3-4% from 2012 despite low consumer confidence and lack of must have gifts

Shorter calendar playing a key role planning

– Early start to holiday season

– More stores open on Thanksgiving day

– Weather is a plus this year

Home goods are the key product for Black Friday deals

Cyber Monday should out pace Black Friday in sales

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Questions?

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